Cove Corporation owns all of Bay Company$$s common stock, acquired for $$48$ million in cash. Cove reported the acquisition as a stock acquisition on its own books. Immediately after the acquisition, Cove reported current assets of $$12$ million, noncurrent assets $($including its investment in Bay$$s stock$)$ at $$144$ million, and liabilities of $$72$ million. The consolidated balance sheet of Cove and Bay at the date of acquisition reports consolidated total assets of $$215$ million, including goodwill of $$45$ million related to the acquisition of Bay. At the date of acquisition, Bay had no previously unreported intangible assets, but its current assets were overvalued by $$2$ million, its noncurrent assets were overvalued by $$16$ million, and its liabilities were overvalued by $$1$ million.

Required

a$.$ Calculate the fair value of Bay$$s identifiable total assets at the date of acquisition.

$Answer

$62$

b$.$ Calculate the fair value of Bay$$s liabilities at the date of acquisition.

$Answer

$59$

c$.$ Calculate the book value of Bay$$s net assets at the date of acquisition.

Note: Use a negative sign to indicate net liabilities.

$Answer

$59$

d$.$ Prepare working paper eliminating entries $($E$)$ and $($R$)$ to consolidate Cove and Bay at the date of acquisition.

Debit Credit

$($E$)$

Investment in Bay

$48,000,000$

$0$

Answer

Cash

$0$

$48,000,000$

Answer

To eliminate Bay's equity accounts against the investment account

$($R$)$

Identifiable intangible assets

$0$

$0$

Answer

Goodwill

$0$

$45,000,000$

Answer

Investment in Bay

$0$

$0$

Answer

$0$

$0$

Answer

$0$

$0$

Answer

To revalue Bay's assets and liabilities to fair value